Materion Corporation · NYSE:MTRN
Materion — Investor Presentation (October 2016)
42 slides from Materion's investor presentation, Oct 31, 2016
Slide 1: Investor Presentation November 2016
Investor Presentation November 2016 EXHIBIT 99.1
Slide 2: Forward-looking Statements
These slides contain (and the accompanying oral discussion will contain, where applicable) “forward- looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that could cause the
Slide 3: Materion: Our Purpose
Materion: Our Purpose Making advanced materials that improve the world 3
Slide 4: Materion at a Glance
Materion at a Glance 4 Adjusted EPS(1) $1.60 Market cap @ 12/31/15 $560M Debt-to-capitalization(1) 3% Operating cash flow $90M Dividend yield ~1% Revenues $1.03B Value-added sales(1) $617.2M 2015 6.9 EV @ 12/31/15 / Adjusted EBITDA(1) (1) For information on our use of non-GAAP financial measures, re
Slide 5: Materion: Mission Critical Advanced Materials
Consumer Electronics 29% Industrial Components 14% Medical 12% Automotive Electronics 8% Defense 8% Telecom Infrastructure 6% Energy 5% W H A T W E D O Materion: Mission Critical Advanced Materials A Balanced Portfolio % of Value-added Sales Q3 - 2016 5 Performance Alloys and Composites 56% Advanced
Slide 6: Why Invest in Materion?
Why Invest in Materion? G O A L N E X T 3 Y E A R S : Sustained growth Double-digit EPS CAGR Strong positions in growing markets • High barriers to entry 1 Promising new product launches 2 6 Strategy for sustained, profitable growth 4 3 Solid cash flow organic growth, acquisitions, dividends, shar
Slide 7: Secular Market Trends Play to our Strengths
Secular Market Trends Play to our Strengths Key Trends • Miniaturization of electronics/IOT • Additional electronic instruments for autos, aircraft • Expanding high performance optical device opportunities • Innovation in medical diagnostics and sensors • Extraction of O&G from previously inaccessib
Slide 8: Well-positioned with Leading Global Product Offering
Well-positioned with Leading Global Product Offering Product 2015 Percent of Value-added Sales Expected Annual Growth Next 3-5 Years Leading supplier of beryllium- containing products ~40% Leading supplier of high-purity precious metal for PVD market ~22% Leading supplier of high-end optical coating
Slide 9: Evolving Potential from Beryllium Supply Shortage
Evolving Potential from Beryllium Supply Shortage Materion – leading position in beryllium market • Only global integrated producer – approximately 70 years of proven reserves in Utah mine – supplies over 70% of world’s mined beryllium • 40% of company sales include beryllium in some form Signs of s
Slide 10: Top Key Markets Over 80% of Sales
Top Key Markets Over 80% of Sales 10 Market 2015 % of Value-added Sales Macro Trends Key Drivers Consumer Electronics 26% • Smart device growth • Sensing devises • IOT Industrial Components 15% • Heavy equipment builds • Plastic tooling • Fire protection (R and C construction) Medical 12% • Blood an
Slide 11: Why Invest in Materion?
Why Invest in Materion? G O A L N E X T 3 Y E A R S : Sustained growth Double-digit EPS CAGR Strong positions in growing markets • High barriers to entry 1 Promising new product launches 2 11 Strategy for sustained, profitable growth 4 3 Solid cash flow organic growth, acquisitions, dividends, sha
Slide 12: Wide Range of Strategic Investments
Wide Range of Strategic Investments… New Wafer Coating Facility ISO Class 5 for Semiconductor Cleanroom Increased Capacity LED Phosphor ToughMet® Capacity Expansion Expanded Beryllium Hydroxide Capacity Singapore Expansion 12
Slide 13: Driving Record Number of New Product Launches
… Driving Record Number of New Product Launches Examples of New Products Sales Growth Sales from new products were 12% of total value-added sales for 2015 New products Existing products Gesture Controls Dovetail Clad ToughMet® Oil & Gas Bulk Metallic Glass (Liquidmetal) 50% 50% Wafer Level Processin
Slide 14: Why Invest in Materion?
Why Invest in Materion? G O A L N E X T 3 Y E A R S : Sustained growth Double-digit EPS CAGR Strong positions in growing markets • High barriers to entry 1 Promising new product launches 2 14 Strategy for sustained, profitable growth 4 3 Solid cash flow organic growth, acquisitions, dividends, sha
Slide 15: Cash Flow and Working Capital Efficiency Focus
Cash Flow and Working Capital Efficiency Focus Lean Sigma • Cycle time reduction • Yield improvement • On-time shipments 15 Improve Working Capital* Efficiency Working capital % of net sales 2015 2018 (F) 25% 27% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2012 2013 2014 2015 Cash Flow from Operatio
Slide 16: Disciplined Capital Deployment Going Forward
Disciplined Capital Deployment Going Forward Return Cash to Shareholders • Share repurchase - $50M authorization ($17M remaining) • Dividends – increased 6% in 2015 Capex Below Depreciation • Invest in facilities • Invest in new products Growth • Organic • Selective bolt-on acquisitions 16 35% Debt
Slide 17: Why Invest in Materion?
Why Invest in Materion? G O A L N E X T 3 Y E A R S : Sustained growth Double-digit EPS CAGR Strong positions in growing markets • High barriers to entry 1 Promising new product launches 2 17 Strategy for sustained, profitable growth 4 3 Solid cash flow organic growth, acquisitions, dividends, sha
Slide 18: Continuing to Execute Three Point Strategy
Continuing to Execute Three Point Strategy Grow and Diversify Revenue Expand Margins Improve Capital Utilization • New products • Asia expansion • Strategic acquisitions • Higher margin products • Cost reductions • Disciplined pricing • Lean sigma • Improve working capital efficiency 1 2 3 Creating
Slide 19: High Value-added Business Model
High Value-added Business Model 19 Identify high growth secular markets Target the fastest growing niches of those markets Expand with innovative products Add synergistic acquisitions Ensure financial discipline 01 02 03 04 05
Slide 20: Appendix
Appendix
Slide 21: Performance Alloys and Composites
Performance Alloys and Composites A-1 Clad Strip 12% ToughMet 11% CuBe 50% Be - Alloys 10% Be – High Purity 13% Europe 20% United States 55% Rest of World 2% Asia 23% Telecom Infrastructure 9% Automotive Electronics 13% Defense 8% Industrial Components 17% Medical 3% Consumer Electronics 22% Other 2
Slide 22: Advanced Materials
0% 5% 10% 15% 20% 25% 30% $100 $125 $150 $175 $200 2012 2013 2014 2015 Q3 2016 TTM Advanced Materials A-2 Services 15% Packaging 10% Targets 56% Chemicals 18% Europe 6% United States 77% Rest of World 1% Asia 16% Telecom Infrastructure 3% Defense 3% Other 22% Medical 7% Consumer Electronics 46% Indu
Slide 23: Precision Coatings
0% 4% 8% 12% 16% 20% 24% $60 $70 $80 $90 $100 $110 $120 2012 2013 2014 2015 Q3 2016 TTM Precision Coatings A-3 BGTS 45% Projection Display Components 18% Optical Filters & Arrays 37% Europe 11% United States 74% Rest of World 1% Asia 14% Automotive Electronics 3% Defense 14% Other 2% Medical 56% Con
Slide 24: Performing Well Despite Headwinds
$1.67 2013 2014 2015 Performing Well Despite Headwinds Operating Margins Adjusted EPS* (Adjusted Op. Profit %* of Value-added Sales) 5.3% 7.7% 7.4% 2013 2014 2015 A-4 * Adjusted EPS and adjusted operating profit as a percent of value-added sales are non-GAAP results. A reconciliation of these measur
Slide 25: Strong Cash Flow and Balance Sheet
Strong Cash Flow and Balance Sheet Cash Flow Balance Sheet 2015 2015 operating cash flow Average operating cash flow last 5 years $90M >$60M Total Capitalization Debt 3% A-5
Slide 26: Entering a Phase of Renewed Long-term Profitable Growth
Entering a Phase of Renewed Long-term Profitable Growth Consolidation and product rationalization Sharpened execution, renewed long-term profitable growth 2002 2012 / 2014 Today Transformation: Growth in new markets and technologies A-6
Slide 27: Materion: The Transformation
Materion: The Transformation GDP growth Multiples of GDP Limited markets Broader market opportunities Low margin Higher margin High infrastructure Efficient infrastructure High fixed and working capital Lower capital intensity Slow cash to cash cycle Faster cash cycle Faster growth – Higher margins
Slide 28: Applications: Smartphones
I/O Connector Contacts Battery Contacts Internal Antenna Contacts Grounding Clips and Audio Jacks Micro Mezzanine Connectors for LCD Screen Internal Electronics and LED • Thin film materials – power amplifiers, LED, SAW and BAW devices, filters, and ICs • Hermetic solutions for SAW • Refining / recy
Slide 29: Application: Aircraft
Application: Aircraft Zz Rudder tt Empennage f | zs Wing Horizontal Stabilizer Fuselage Sy LE Slats 0 Controls \\ Spoilers Sy SS a { SY, Doors ys Cockpit Controls bee Flaps a= LE as Ailerons <a pA eo re y S Xe a a fe Slats aba Nose Gear DR 6 a) a Folding Stairs he (S274 Engine/TR MATERION
Slide 30: ToughMet Heavy Machinery Applications
ToughMet Heavy Machinery Applications A-10
Slide 31: Directional Drilling and Measurement
Directional Drilling and Measurement (Many ToughMet Components) A-11 © 2013 – Proprietary to Materion Brush Inc.
Slide 32: Applications: Oil & Gas
Under Water Wellhead Equipment Directional Drilling Equipment • Measuring While Drilling (MWD) • Logging While Drilling (LWD) • Mud Pulse Telemetry (MPT) systems Drill Bits Structural Rig Components Wellhead Control Equipment Other Oil & Gas Applications: • Artificial lift equipment • Elemental anal
Slide 33: Applications: Medical
Cardiac Rhythm Management • Electronic interconnects / components • Niobium / titanium electron beam weld Insulin Pump • EMI shielding and grounding • Electrical terminals in connectors Seizure Control • Thin film deposition implantable electrode – Parkinson's disease (R&D) External glucose analysis
Slide 34: Applications: Automotive Electronics
Lithium Ion Battery Interconnects Battery Management Resistors Electronic Power Steering Modules ABS Leadframes Engine Efficiency Oxygen Sensors Mirror & Windshield Electronic Connections Air Bag Sensors Lamp Socket Connectors Auto Dimming Mirror Connectors Hybrid Vehicle Motor & Module Connectors W
Slide 35: Applications: Defense
Applications: Defense • Infrared Sensors for fighter jet and UAV optical targeting • Electronic packaging for defense avionics, radar and electronic countermeasure systems • Structural and electronic components for satellites • X-ray windows in security imaging systems • Laser protection optical coa
Slide 36: Applications: Telecommunications Infrastructure
Applications: Telecommunications Infrastructure Base Stations • Coaxial connectors • High power amplifiers Local Area Networks • Shielding • Modular jacks • PCB sockets • Processor sockets Other Telecommunications Infrastructure Applications • Undersea repeater housings A-16
Slide 37: Applications: Solar Technologies
Technology: Amorphous Silicon (a-Si, tandem and multi-junction) Thin Film (PVD) Materials Silicon based photovoltaic cells • Front and back contact layers • TCO Transparent conductive oxide layers Technology: Cadmium Telluride (CdTe) Thin Film (PVD) Materials • Cadmium based solar cell architecture.
Slide 38: Reconciliation for Value-Added Sales
Reconciliation for Value-Added Sales A-18 $ in millions Value-added sales is a non-GAAP measure that removes the impact of pass-through metal costs and allows for analysis without the distortion of the movement or volatility in metal prices. Internally, we manage our business on this basis, and a re
Slide 39: Reconciliation for Adjusted EPS
Reconciliation for Adjusted EPS A-19 As detailed in the above reconciliation, we have adjusted the results for certain special items such as insurance and other litigation claims, legacy environmental costs, merger and acquisition costs, cost reduction actions, and certain income tax items from the
Slide 40: Reconciliation for Debt-to-Capitalization
Reconciliation for Debt-to-Capitalization A-20 Debt-to-capitalization is our total debt divided by net debt plus shareholders’ equity. Net debt (cash) is a non-GAAP measure calculated by subtracting cash & cash equivalents from our total outstanding debt. We are providing this information because we
Slide 41: Reconciliation for EV / Adjusted EBITDA
Reconciliation for EV / Adjusted EBITDA A-21 Amounts in millions, except share price EV/Adjusted EBITDA is our enterprise value divided by adjusted EBITDA. Adjusted EBITDA is calculated by adding depreciation, depletion & amortization and certain special items such as insurance and other litigation
Slide 42: Materion Businesses
mN MATERION MATERION BUSINESSES Advanced Chemicals Barr Precision Optics & Thin Film Coatings Brush Beryllium & Composites Brush Performance Alloys Ceramics Electrofusion Large Area Coatings Microelectronics & Services Natural Resources Technical Materials